Law School Discussion

WTF? Credit score of 550

Re: WTF? Credit score of 550
« Reply #10 on: May 27, 2005, 09:11:49 PM »
The real question is, why do you need to increase your credit score?  To go further into debt?  Do you need a high credit score to buy a house?  No.  There are banks and lenders who will do manual underwriting of conventional loans.

I know you don't know me from Adam, but I would suggest you check out Dave Ramsey and his book The Total Money Makeover .

It literally changed me and my family's life.


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Re: WTF? Credit score of 550
« Reply #11 on: May 28, 2005, 01:28:20 AM »
Fico scores do matter for buying a house. The higher the score, the lower the APR. It would be in his best interest (no pun intended) to increase his score to or over 700. The cost you save by the APR difference will means hundreds of dollars per month in savings.

Re: WTF? Credit score of 550
« Reply #12 on: May 28, 2005, 07:40:04 AM »
Do not close any credit card accounts.  Pay them off, yes.  Cut up the cards, or put them away permenantly, yes.  Do not close the accounts.  A large chunk of your FICO score comes from your credit history and your amount of available credit to used credit ratio.  You close a card you erase history and you make the overall percentage of your debt to available credit higher. 

Plus if you pay of a card you create leverage.  Pay off one card and THEN call and ask to close the account.  They will transfer you to a person in their retention center who will offer you a balance transfer deal.  Get a low rate for the life of the balance transfer.  If you ever mess up (make a payment even a day late) your rate will skyrocket.  Then you just call the card you just emptied and transfer back.  The companies will negotiate with you if you can free up one card. 
I have 7 cards.  They used to all carry balances.  Now only 4 do, as I consolidated.  All at 4% or lower for the life of the balance transfer.  All are set up for automatic deposit from my bank- so I can't be late.  The other three which are open keep my available credit high.  These cards are not in my wallet, they are in a drawer.  My credit score even though I have limited income and way more debt than you is 718.  I get incredible low balance tranfer offers in the mail every week and they just keep raising my credit limits.  Of course this system requires discipline, but it saves you the most money in the end.     

If you haven't done this already, collect all your statements.  On one piece of paper create a spreadsheet with the name of each card, the minimum payment, the amount you paid last month, the percentage rate, the amount of finance charges you paid last month, the total balance and the total available credit.  This information all in one place is very powerful.  It will show you the exact amount you owe.  It will show you how much it costs you each month to owe all of that.  It will help you pick which card you want to tackle first.  I suggest the one with the lowest balance so you can follow plan above.  Once your actions start to save you money and once you see the balances start to go down, you will get more motivated to keep moving on eliminating your debt.  I make this chart in a notebook every month, and it has saved me so much money in interest charges.  Plus it just feels more managable once you write it all down.     

Re: WTF? Credit score of 550
« Reply #13 on: June 03, 2005, 01:36:47 AM »
I have a FICO score of 700 and I was denied credit by a crazy loan company. Go figure!

Re: WTF? Credit score of 550
« Reply #14 on: June 03, 2005, 08:07:31 AM »
I haven't read the whole thread so excuse me if I repeat something.

But I think you'd be really unwise to settle with the card companies. 

Live cheaply.  Get a roommate -- get three roommates.

You may want to get a book out of your library by Suze Orman that's geared towards the crowd in their twenties and early-thirties -- young, broke something it's called.  I can't stand Suze Orman when i see her on television (her personality is pretty annoying).  But she gives some pretty good advice on credit problems.

Re: WTF? Credit score of 550
« Reply #15 on: June 03, 2005, 10:19:28 AM »
SleepyGuy is speakin the truth on this one.

Make life as easy as possible. Unfortunately the only way to revive credit is to make steady payments for a year.  You have to consolidate first, and then ask your consolidator how long and how much the payments should be to raise the score.

I know that when I first consolidated they told me that if I maintained payments of X amount for 12 months straight then my score would increase by Y amount.

It's all bull. HTH

Re: WTF? Credit score of 550
« Reply #16 on: June 11, 2005, 03:20:29 PM »
Live cheaply.  Get a roommate -- get three roommates.

Maybe he wants to get married by now -- case in which his expenses would go up even more.

Re: WTF? Credit score of 550
« Reply #17 on: June 12, 2005, 12:32:49 AM »
Well, okay.  Get married and have three roommates.  How many people can sleep on a queen size bed?

Re: WTF? Credit score of 550
« Reply #18 on: June 28, 2005, 05:09:42 PM »
I have a FICO score of 700 and I was denied credit by a crazy loan company. Go figure!

This is because credit score is only half the equation.

You may have the 700 score needed to qualify for a $500,000 mortage, but if you only make 35k/year, you won't have enough money to make the payments, which means: no loan.

Lenders look at not only your credit score, but your Debt-to-Income ratio as well.

Specifically, there are two ratios that are important:

(1) "The Front End" : the amount of your projected housing payment divided by your monthly pre-tax income

(2) "The Back End" : the amount of your projected housing payment PLUS any minimum payments you have on any other debts that appear on your credit report divided by your monthly pre-tax income

Usually, lenders like to keep the front end under 25-36% (IE your projected housing payment is no more than 25-36% of your monthly pre-tax income) and the back end under 40-45% (meaning your TOTAL debt payments, for housing and credit cards and car payment, etc. are no more than 40-45% of your gross monthly income).

If the loan that was denied was for a student loan, that may have to do with the fact that student loan lenders often pull only the information that interests them, not everything, AND they consider you as having no income because you will be studying.

They are different beasts all together.


Re: WTF? Credit score of 550
« Reply #19 on: June 29, 2005, 03:43:26 AM »
Chances are he can't settle anyway.  He had mentioned that they were charged off already.  That means the card companies have already written him off as a payer and sent his paper (debt) to collection agencies.  If they were to settle with him for less, they would still owe the agencies their fee, which is usually 50%.  And it isn't 50% of what gets collected.  The agencies will demand 50% of the total.  No card company in their right mind would try to settle a debt they have already sent to an agency.  Best cheap and pay what you owe.  Not only is it responsable, but it's the right thing to do anyway.  I don't mean to preach.  I was a debt consultant for companies who couldn't collect receivables until I joined the military.  You would be surprised how much companies get hurt by people who don't pay their bills.